Current Yield = Annual coupon amount ÷ Current Bond

Example: Bond price = 94.17

7% semiannual coupon rate
8 years to mature
Par or face value = 100
Annual coupon amount =
YTM 8%
If the bond sells at discount = 94.17
CY = 7.43% > 7% coupon rate

If the bond sells at par = 100

CY = 7.00% = 7% coupon rate

If the bond sells at premium =

CY = 6.73% < 7% coupon rate

Yield to Maturity
Total future amount at maturity
Face or Par Value
 Return of principal =
Total return in amount =

Semiannual coupon
Total return in amount
Capital gain/loss =
Total amount of coupon
Reinvestment income =
Total return in amount =

Percentage of reinvestmment income in total return

Bond with a 7% coupon

Bond with a 12% coupon

Yield of Bond Portfolio
Annual Coupon Term to
Bond Rate Maturity
A 0.07 5
B 0.105 7
C 0.06 3

Time
PeriodBond A Bond B Bond C
1 350000 1050000 900000
2 350000 1050000 900000
3 350000 1050000 900000
4 350000 1050000 900000
5 350000 1050000 900000
6 350000 1050000 30900000
7 350000 1050000
8 350000 1050000
9 350000 1050000
10 10350000 1050000
11 1050000
12 1050000
13 1050000
14 21050000
mount ÷ Current Bond Price
t
0
1
0.04 2
3
7 4
76.38586 5
94.17 6
coupon rate YTM 8% 7
8
9
coupon rate YTM 7% 10
11
104 12
coupon rate YTM 6.36% 13
14
15
16
100
 94.17
urn in amount = 82.28
176.45

3.5

ain/loss = 5.83
coupon 56
ome = 20.385859 i.e. interest on interest component
urn in amount = 82.215859

nt income in total return in amount= 24.80%

Percentage of reinvestmment income

Years to Maturity
2 3
oupon 5.20% 8.60%

coupon 8.10% 12.90%

Par Value Price YTM
10000000 9209000 0.09
20000000 20000000 0.105
30000000 28050000 0.083
57259000

Portfolio 0.0476966 -57259000

2300000 2300000
2300000 2300000
2300000 2300000
2300000 2300000
2300000 2300000
32300000 32300000
1400000 1400000
1400000 1400000
1400000 1400000
11400000 11400000
1050000 1050000
1050000 1050000
1050000 1050000
21050000 21050000
YTM 0.047697
 CF
-94.17 -94.17 -94.17
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 3.5 3.5
3.5 97.77 99
3.5 0.0382
3.5
3.5
3.5
103.5
0.0400
est component

mment income

8
24.80%

31.00%
6-year floating rate bond selling for 99.3098, the coupon ra
six months. The reference rate is 10% annual
Assumed margin = 0.40%per six-month
Annual Seminual. Seminual.
Time Reference Reference Coupon
Period Rate Rate Rate
1 0.1 0.05 0.054
2 0.1 0.05 0.054
3 0.1 0.05 0.054
4 0.1 0.05 0.054
5 0.1 0.05 0.054
6 0.1 0.05 0.054
7 0.1 0.05 0.054
8 0.1 0.05 0.054
9 0.1 0.05 0.054
10 0.1 0.05 0.054
11 0.1 0.05 0.054
12 0.1 0.05 0.054
8, the coupon rate is reset every
Par value = 100
x-month
0.0048
Cash Annual basis points
Flow 80 84 88 96 100
5.4 5.119454 0.0548
5.4 4.853483 0.0548
5.4 4.60133 0.0548
5.4 4.362277 0.0548
5.4 4.135644 0.0548
5.4 3.920785 0.0548
5.4 3.717089 0.0548
5.4 3.523975 0.0548
5.4 3.340894 0.0548
5.4 3.167324 0.0548
5.4 3.002772 0.0548
105.4 55.56472 0.0548
99.30975
 0.008
0.80%
Calculations of Yield Changes

Following are the three yields in three months:

Month 1 4.45%
Month 2 5.11%
Month 3 4.82%

Absolute yield change from month 1 to month 2 =

Absolute yield change from month 2 to month 3 =

Percentage Yield Change = 100 x ln (new yield ÷ initial yield

Percentage Yield Change = 100 x ln (new yield ÷ initial yield

 4.45% - 5.11% x 100 = 66 basis points

5.11% - 4.82% x 100 = 29 basis points

114.83%
d ÷ initial yield) = 13.83%
94.32%
d ÷ initial yield) = -5.84%